Kazakhstan is a grape producer, as well as an importer of grapes. Suppose the following graph shows Kazakhstan's domestic market for grapes, whereSK is the supply curve and DK is the demand curve. The free trade world price of grapes (Pw) is $800 per ton. Suppose Kazakhstan's governmentrestricts imports of grapes to 60,000 tons. The world price of grapes is not affected by the quota. Analyze the effects of the quota on Kazakhstan'swelfare.On the following graph, use the purple line (diamond symbol) to draw the Kazakhstan's supply curve including the quota Sk+Q. (Hint: Draw this as astraight line even though this curve should be equivalent to the domestic supply curve below the world price.) Then use the grey line (star symbol) toindicate the new price of grapes with a quota of 60,000 grapes.PRICE (Dollars per ton)400036003200280024002000160012008004000020SKKPW40 60 80 100 120 140 160 180 200QUANTITY (Thousands of tons)SK+QThe equivalent import tariff for Kazakhstan's grape import quota is $Price with QuotaChange in PSQuota RentsDWL?In the previous graph, use the green area (triangle symbol) to shade the area that represents the effect of the quota on domestic producer surplus(PS) relative to domestic producer surplus under free trade. Use the tan quadrilateral (dash symbols) to shade the area that represents the quotarents. Finally, use the black areas (plus symbol) to indicate the deadweight loss (DWL) resulting from the quota's consumption and protective effects.per ton of grapes.If Kazakhstan's government auctions off the quota licenses in a well-organized, competitive auction, Kazakhstan experiences a deadweight loss of$(Hint: Select a shaded region to see its area. Be sure to adjust for the units on the quantity axis.)

Import Tariff refers to the tax levied by the government and customs authority on the import of…

On the following graph, use the purple line (diamond symbol) to draw the Kazakhstan's supply curve including the quota SK+Q. (Hint: Draw this as a straight line even though this curve should be equivalent to the domestic supply curve below the world price.) Then use the grey line (star symbol) to indicate the new price of grapes with a quota of 60,000 grapes.

On the following graph, use the purple line (diamond symbol) to draw the Kazakhstan's supply curve including the quota SK+Q. (Hint: Draw this as a straight line even though this curve should be equivalent to the domestic supply curve below the world price.) Then use the grey line (star symbol) to indicate the new price of grapes with a quota of 60,000 grapes.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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